Deliver Value Through Project Management
Learning Objectives
After completing this module, you will be able to:
- Define project value.
- Explain how business value is delivered through projects.
- Explain methods for measuring project value delivery.
Define the Value of Your Project
When it comes to project management, value may be defined in monetary or relative terms. Organizations invest in projects with the intent of receiving value—for example, monetary value in the form of profits and relative value in the form of customer satisfaction and loyalty. The standard for defining project success has long been delivering on-time, on-budget while meeting customer requirements. Now, organizations recognize that projects must be aligned with the strategic objectives of the organization and must deliver value.
What if a project is successful but isn’t aligned with the strategic objectives of the organization? What if a project of great strategic importance is challenged with cost and schedule overruns? How was the intended value of these projects defined? Where in the project lifecycle was the value expected to be realized? What metrics are in place to measure business value?
Walden University helps us see how we can address these questions by exploring an approach to delivering business value through projects and project management.
Deliver Value
The project manager must explicitly define the project’s business value in collaboration with the sponsor and key stakeholders during the initiating and planning stages and ensure that it is well understood by the project team. As the value gets defined, it’s important to note the final result of the project is not the only thing capable of delivering value. There may be incremental value delivered throughout the project, and value can continue to be realized after the project ends. It is also important to account for the value delivered as both the tangible and intangible benefits of a project.
Project management methods include metrics for measuring project performance in terms of scope, time, and cost. It is still uncommon to see specific emphasis on metrics associated with measuring business value.
How can organizations use project management to increase visibility into the value of its projects? Include the following elements at different phases of the project lifecycle.
Project Concept
Business case: A business case includes a statement of the business need and intended value, why the project should be undertaken to address the business need, and how the project is expected to deliver business value in support of organizational strategy.
Project Initiation
Project charter: Every project proposal or charter includes a definition of the intended business value, an explanation of the approach for measuring business value, and a high-level plan to monitor and report progress to stakeholders on a regular basis. The definition of the intended business value of the project should be directly linked to the strategic goals of the organization.
Project Planning
Project management plan: A good project management plan contains sufficient detail for stakeholders to understand exactly how the project intends to deliver business value. Use the intended business value from the charter to identify the individual elements of value that will be managed and measured during the execution of the project. Develop metrics for measuring these elements. Also include the thresholds on which stakeholders should make decisions about the health or direction of a project. Also identify how you will communicate progress toward value realization.
Project Execution/Monitoring/Controlling
During the execution of the project, capture data associated with business value using the metrics specified in the project plan and present them to your stakeholders. This typically occurs at key milestones in the project when stakeholders evaluate the status and performance of a project and make decisions about its direction and future.
Methods and Metrics
The requirements for measuring the business value will vary depending on the project management methodology. For example, planning and execution are iterative and delivery is incremental when Agile methods are used. In this case, business value should be defined for each iteration and stakeholders will likely require it to be measured and reported as each increment is delivered.
With traditional project management, business value should be planned into the project and measured and reported at key milestones. It is usually assumed, though, that business value is realized when the project is finished.
Regardless of the methodology it is important to understand how stakeholders define business value and have a plan to manage and measure it.
Let’s walk through an example.
Gadgets & Widgets, Unlimited (GWU) has identified an opportunity to enter the consumer technology market by developing and marketing a home management system. This new product is expected to generate $100,000 in new revenue annually. GWU must deliver the product to market within 12 months. A budget of $500,000 has been allocated for the project.
What is the intended business value of this project?
- Entry into the consumer technology market
- $100,000 in new revenue
In order to realize the business value of the project it must be delivered within 12 months, so schedule performance is important. It must not exceed the budget of $500,000, so cost performance is important.
How can business value be measured for this project?
Market Entry
In anticipation of the launch, GWU conducts a marketing campaign to draw consumers to its new website to learn about the features of the new system.
These metrics will be used to assess this element of business value.
- Total site visitors: Since this is a new site for GWU, tracking the total number of visitors provides an indication of general interest in the new product.
- Page views: This helps GWU understand if consumers are quickly browsing and leaving or staying to explore the information about the new product.
New Revenue
GWU didn’t want to wait until the launch of the product to begin realizing the revenue it anticipated. A feasibility study prior to the start of the project determined that the payback period would be 5 years. GWU added the ability for consumers to pre-order the system on the new website.
These metrics will be used to assess this element of business value.
- Conversion rate: This metric is an indication of the rate at which visitors to the site are making purchases.
- Revenue per visitor: This metric provides data on how much an individual spends during a single visit to the site.
Understanding consumer buying behavior will help GWU assess the likelihood and timing of meeting its revenue goals: Are consumers converting? Are they ordering the entire system as a package? Are they choosing components a la carte?
Schedule Performance
GWU requires that the new product be delivered within 12 months. This is to coincide with the next annual home technology product show. This fixed deadline for delivery requires that the project team carefully manage the schedule performance of the project.
This metric will be used to measure this element of business value.
- Schedule performance index: This metric is a ratio of the planned duration of the project over the actual duration of the project at a point in time. A result of 1.0 or greater indicates that the project is on schedule or ahead of schedule.
Cost Performance
Stakeholders for the GWU project have allocated $500,000 for the development of the new product. They are not willing to spend more. This fixed cost of delivery requires that the project team carefully manage the cost performance of the project.
This metric will be used to measure this element of business value.
- Cost performance index: This metric is a ratio of the planned cost of the project over the actual cost of the project at a point in time. A result of 1.0 or greater indicates that the project is on budget or ahead of budget.
Sum It Up
In this module, Walden University walked you through the essentials of project management—what it is, the methodologies and how you can apply them, and how you use project management to define and communicate value. Good job on learning the essentials of project management!
Want to Learn More?
The modules in this trail were developed in collaboration with Walden University to introduce you to the fundamentals of project management. If you want to learn more, explore Walden’s MBA Project Management specialization and offerings in the university’s School of Lifelong Learning.